JAKARTA: The Indonesian Palm Oil Producers Association (Gapki) has projected that extreme El Nino could potentially reduce crude palm oil (CPO) output by up to five million tonnes.

Gapki chairman Eddy Martono said that the significant impact of a severe El Nino on palm oil production could be felt as early as next year.

Meanwhile, the rollout of a mandatory increase in palm-based biodiesel to a 50% blend from 40% is expected to increase domestic CPO absorption and reduce CPO supply for export markets.

However, Eddy stressed that ensuring palm oil supply for domestic use remained the top priority.

“Supply for domestic use is prioritised, so there will be no problems with domestic demand. What will decline is export volumes,” he said on Tuesday.

The association previously estimated that the B50 implementation could lift domestic CPO consumption for biodiesel to between 16.3 million and 17 million tonnes annually.

Producers expect national CPO output of around 53 million tonnes in 2026, which should leave enough supply to fulfill the higher domestic demand for fuel.

Indonesia, the world’s largest producer and exporter of palm oil, is expanding domestic use of the commodity as President Prabowo Subianto pushes to reduce diesel imports and achieve energy self-sufficiency.

Energy and Mineral Resources Minister Bahlil Lahadalia said B50 would boost domestic demand for CPO and provide market certainty while maintaining price stability at the point where farmers sell their produce. But Eddy said that CPO prices remained difficult to predict, as they are affected by various factors, including the B50 rollout, developments in other vegetable oil markets and El Nino.

“It’s quite hard to predict an increase in CPO prices due to El Nino and the implementation of B50 biodiesel because CPO prices are also driven by other vegetable oils such as sunflower, soybean, rapeseed and canola oils.

If the supply of other vegetable oils increases, it can put pressure on vegetable oil prices, including CPO,” he explained.

Earlier this month, the National Development Planning Board (Bappenas) said that El Nino could reduce productivity in several agricultural commodities, such as rice, palm oil and coffee.

Bappenas has set four key clusters to anticipate and manage risks posed by El Nino, including forestry, land and agriculture, energy and water resources, health and aquatic foods.

In the forestry, land and agriculture category, El Nino is also predicted to increase the risk of forest and land fires.

The Meteorology, Climatology and Geophysics Agency (BMKG) has forecast El Nino this year to escalate to strong levels and potentially impact strategic sectors, especially in East Nusa Tenggara, West Nusa Tenggara, Java, Bali and South Papua.

“Since March 2026, BMKG has predicted that Indonesia will experience a drought coinciding with El Nino, which at that time was of moderate intensity,” said BMKG head Teuku Faisal Fathani on Aug 4.

He noted that the World Meteorological Organisation declared El Nino active on June 2, while analysis indicated the phenomenon remained strong from May through July.

Teuku explained that El Nino is different from the dry season, as it could exacerbate the dry season by making the conditions drier and prolonging its duration.

BMKG expects the effect of El Nino in Indonesia to wane in mid-October during the rainy season, even though global forecasts suggest that it could last until May next year. — The Jakarta Post/ANN

Source : The Star